Getting Ready to Apply for a Mortgage Home Loan

From the Superpages.com

The vast majority of American's require a mortgage home loan to buy a home. For most American's, their home is their largest asset and their mortgage is their largest debt. These mortgage home loans allow home ownership that would otherwise be impossible, as most American's cannot save the full cost to purchase a home. Therefore, it is essential to be prepared and ready to apply for a mortgage home loan when you get ready to buy your house.

Getting Ready to Take a Mortgage Home Loan

It is a good idea to begin preparing to take a mortgage home loan several years before actually applying for a loan. This is because many of the things you need to qualify for a mortgage- such as a stable employment history, good credit and a down payment- can take several years to acquire. Furthermore, you want to ensure that you have a sound budget and that you will be able to afford your mortgage payments once you are in your home.

Employment History and Your Mortgage Home Loan

Mortgage lenders want to ensure that you have a reliable source of income. As a result, most lenders prefer to lend to buyers who have been at the same job- or at least in the same industry- for two or more years. A two year history with the same company demonstrates you have achieved relative stability and that your income is likely to remain the same or continue to grow. Therefore, you should avoid job-jumping for several years before applying for a mortgage.

If you are self-employed, you should plan to have tax returns dating back for at least two or more years demonstrating consistent earning potential. It can be more difficult for self employed people to demonstrate a stable employment history, so you may need to have more documentation.

Your Credit and Your Mortgage Home Loan

You want to have the best credit score you can before applying for a home loan. Order a copy of your credit reports and verify that there are no inaccuracies. Pay down your debt as aggressively as you can and avoid opening new accounts within two years of applying for your mortgage to achieve the best rates possible.

Your Down Payment and Your Mortgage Home Loan

Most lenders prefer to lend to buyers with a down payment. Twenty percent is the standard, and by saving this amount of money, you can avoid having to pay private mortgage insurance, an additional monthly cost that is tacked on to your bill if you have less than 20 percent to put down.

Your Budget and Your Mortgage Home Loan

In order to determine whether you can truly afford to make your mortgage payments, you should begin setting that amount of money aside each month as early as two years prior to buying your home. For example, if your current rent is $800 a month and your projected mortgage payment, with taxes, fees and insurance is going to be $1200 per month, then you should put aside the $400 each month towards your down payment fund. This way, you will get used to "making your mortgage payment" and you will be able to see whether you can truly afford this monthly payment each month.

Many experts also advise setting up an emergency fund before taking a mortgage home loan. This is a good idea for several reasons: first, if you lose your job you will still be able to make your mortgage payments. Second, when you are a homeowner, repair bills and other such costs fall to you and not to your landlord. Experts recommend anywhere from three to six months of living expenses should be in your emergency fund.

Being Prepared

Of course, there are plenty of other steps involved in preparing for a home mortgage loan, such as researching lenders and interest rates and types of mortgages. However, even before you begin the process, these essential steps will help get you on your way to getting the best mortgage home loan possible.